Analysis - Thursday, March 22, 2001 8 pm
At the lows today the Dow was down another 381
points, reaching a print low of 9106.54. We closed down
97 points for the day in the Dow, and up 67 in the Nasdaq.
As previously mentioned, our most likely target for this
leg down of the Bear Market is down near or below 6970 in the
Dow. The Dow reached its Bull-Market high in January of 2000,
and even though the Dow basically only traded sideways from
there until January of this year, we have been in a Bear Market
since 1/14/00. In our opinion, this is the first true Bear
Market of the last 19 years. In examining each of the major
Bear Markets and Bull Markets of history, the late Edson Gould
discovered that every Bull Market and every true Bear Market
unfolded in at least 3, and sometimes 4 "Steps" up or down.
These Steps are similar to what most technicians call Bull or
Bear-Market legs, and to what Elliott analysts refer to as
"waves." However Gould's work was far more advanced than that
currently used by most market analysts who refer to Bull or
Bear Market legs. Gould attempted to find a way to apply the
principles of Quantum Mechanics to the movement of stock
prices. Gould stated that his greatest market discovery
was made after reading a book called The Crowd, written
by Gustave Le Bon. This book was originally published in
the late 1800's. It has been called "the greatest single
work ever written on mass, or crowd psychology." You must
keep in mind that the movement of stock prices is essentially
a function of crowd psychology. Individuals will tend to
act differently when they become members of a crowd, than
they would if totally on their own. It was what Gould
discovered from this book which lead to his discovery of
how to apply Quantum Mechanics to the movement of stock prices.
We have studied every major forecast Gould made for over
30 years, and in our opinion he was one of the greatest,
if not the greatest, of all the market gurus we have
studied.
As we stated, Gould discovered that every true Bear Market
moves down in at least 3, and sometimes 4 Steps. Step 1
is the intial decline from the Bull-Market high. There is
then a rally, which can sometimes last for several months, but
fails to reach new highs. From there Step 2 down to new Bear
Market lows begins. After that second Step down bottoms, there
is then another rally, which again can last for several
months. After that rally, Step 3 down to new Bear Market lows
begins. We have examined every major Bear Market Step in the
Dow for well over 100 years, and have found there is a
remarkable similarity in those Steps. The milder Steps in
these Bear Markets have been somewhere near 20% from intraday
high to intraday low. The major Steps have been near 40% or so
from intraday high to intraday low. We are currently in the
second Step down of the current Bear Market from the 1/14/00
Bull-Market highs. If this Step down carries the Dow down 40%
from its start, the Dow would reach the 6970 area. Just when
this target is most likely we cannot yet be sure. However, if
this Step down does reach that area before final bottom it
will mean the final low later this year will come in even
lower.
We now have a target for when the final low later this
year should be seen. It is in part based on the late George
Lindsay's Count-From-the-Middle Section technique. This is
one of the most accurate methods of pinpointing a Bear Market
low we have ever encountered. We will discuss this forecast
in detail in our next newsletter, but we will say that it does
not call for a final low until the fall of this year. Now we
will again stress that we expect to see several very strong
rally phases between now and then. At least a couple of those
rally phases could last for a few months.
Very short term we should see some further rally. In
fact it is possible that the Gann 3-Day Chart could turn up
tomorrow. However we believe this particular rally phase will
be fairly brief, probably not lasting more than a couple of
days at best. It should then be followed by another decline
which should carry the Dow back down near or below today's
lows. The next Cycle low is due near March 28, plus or minus 1
day. After that low a stronger rally is then likely, but the
next Cycle high is due near April 5, plus or minus 1 day.
While we expect some further rally tomorrow, any decline
below 9106 on a print basis in the Dow will be bearish, and
signal that an even stronger decline is coming, probably into
early next week.
We have received far more faxes and e-mail questions than
is possible for me to personally answer. Most of the
questions regard similar issues, which we will put together
and try to briefly answer for you on this weekend's Sunday
evening update. |
